On May 11, JD Powers released a study showing that nearly a third of consumers who switched banks said the deliberately excluded ones seen as financially unstable, or as having a bad reputation or questionable ethics.

Reputation is the impression formed by stakeholders of how a company manages its intangible assets. Risk management and ethics compliance are exemplary business processes for intangible asset management.

Stakeholders comprise employees, suppliers, customers, competitors, and investors. Reputation creates among stakeholders a set of expected behaviors. The Steel City Re Reputation Index is designed to capture the financial implications of both the aforementioned stakeholder behaviors and expectations of stakeholder behaviors as determined by corporate reputation. We used the Steel City Re Corporate Reputation (IA) Index to determine if there was a relationship between a bank’s financial stability, as reflected in its one-year ROE, and its reputation.

The table below shows the top 10 companies in the 175-company Regional banks sector. Over the past year, their median ROE was -10%. The median ROE for the year for the sector as a whole was -49% and the ROE for the bottom ten banks in this sector was -89%.

The data suggest that banks may benefit from transforming their current risk management processes into holistic risk and reputation management systems.